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Post-Earnings, Call Volume Spikes on Ciena Corporation

But some of CIEN's call volume might be due to shorts hedging their bets

by 12/8/2011 11:32 AM
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Ciena Corporation (CIEN - 12.48) reported an adjusted fourth-quarter profit of 3 cents per share early this morning, disappointing analysts, who were expecting earnings of 6 cents per share. However, the firm said revenue rose 9.1% to $455.5 million, topping Wall Street's consensus estimate for sales of $450 million. Against this backdrop, more than 8,700 calls have been traded so far, reflecting five times the equity's expected intraday call volume. Most of the action has centered around the at-the-money December 12 strike, where roughly 2,500 calls have crossed the tape -- over half of them at the ask price, pointing to buyer-driven activity. This option currently carries open interest of 6,436 contracts, making it difficult to discern if new positions are being opened here today.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for CIEN sits at 0.78, confirming that calls outnumber puts among options expiring within three months. This ratio ranks in the 12th percentile of its annual range, which means that short-term options players have been more bullishly aligned toward the stock just 12% of the time during the past year.

However, short interest on CIEN climbed by 6.23% over the most recent reporting period, suggesting that some of the recent call volume could be the result of short sellers seeking to hedge their bets. Either way, these bearish plays make up a hefty 30.25% of the company's float. At the stock's average daily trading volume, it would take almost a week to cover these shorted shares.

On the technical front, CIEN has shed close to 41% of its value year-to-date, and has underperformed the broader S&P 500 Index (SPX) by around 23% during the past 60 sessions. On the charts, the stock appears to be testing its 10-week and 20-week moving averages, a duo of trendlines that have served as resistance since early June.

At last check, CIEN is up about 4.8% and is trading at $12.48.


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